An obscure state Supreme Court ruling may allow auto accident victims to collect additional large settlements from their insurance carriers.

The June 29 ruling means an additional $400,000 for Janice Lindsey of Phoenix, who was severely injured in a 1989 automobile accident that also killed her husband, Walter.

Lindsey sued her insurance carrier, State Farm Mutual Automobile Insurance Company, claiming that she and her husband were covered by underinsured motorist provisions included in three separate policies--one for each automobile they owned.

Rather than claiming $200,000 in underinsured benefits provided in the policy for the car that was involved in the accident, Lindsey claimed that she and her husband should collect an additional $400,000 from underinsured benefits included in the policies covering their other vehicles.

The Supreme Court agreed with Lindsey, saying State Farm failed to state specifically that it would pay underinsured and uninsured benefits for only one policy, even if a family owned multiple policies.

"This is a big change in injury law," says Mesa personal injury lawyer Scott Richardson. "Before this ruling, insurance companies were allowed to collect money for separate policies on separate cars, but would only pay on one of the policies if the policyholder was killed or seriously injured in an accident."
On July 3, 1989, Walter Lindsey was driving a 1987 Chevrolet Celebrity with Janice as a passenger. The Lindseys were in Oklahoma, driving to Phoenix, when they were involved in a collision caused by the other driver.

That driver had liability insurance limits of $25,000 per person and $50,000 per accident. The driver's policy paid $50,000 to Janice Lindsey, which failed to cover the cost of treating her injuries or the financial loss stemming from her husband's death.

Janice Lindsey turned to State Farm for additional compensation under her underinsured motorist clauses. State Farm agreed to pay $100,000 to her and $100,000 to cover the death of her husband under the underinsured provisions in the insurance policy written for the 1987 Chevrolet.

Lindsey sued State Farm, claiming the carrier should also pay underinsured claims from Lindsey's other two policies. The Supreme Court agreed, and State Farm paid an additional $400,000.

The impact of the ruling could be a bonanza for potential litigants and their attorneys. At the same time, premiums could jump in the face of higher settlement payments.

State Farm controls 19 percent of the Arizona automobile insurance market, with about 501,000 policies written. While some Arizona insurance companies write single policies for multiple vehicles owned by a policyholder, State Farm issues separate policies for each car.

"We feel rating a car based on its use and the way it is driven more accurately reflects the risk that is represented," says State Farm spokesman Mark Brandt.

Brandt says the court ruling essentially expands the amount of coverage for policyholders beyond what State Farm intended. The result will be upward pressure on premiums.

"Any time that language is expanded by a court decision, obviously that expands the dollars you pay out in claims and, as a result, it will come in increasing premiums from customers," Brandt says.

The attorney who represented Lindsey in the Supreme Court case says the decision is a signal to Arizona insurance companies to clearly state the terms of their policies.

Charles D. Roush says the language in the State Farm policy was unclear as to whether multiple automobile policies owned by one person could be "stacked" together to seek multiple claims. Insurance companies must plainly state to customers what coverage is provided.

"If you're going to exclude something, write it in a way people can understand," Roush says.

David M. Bell, the attorney who represented State Farm in the Supreme Court case, says the company must change the wording in its policies if it intends to conform with Arizona statutes that allow insurance companies to restrict multiple payments to policyholders.

"They need some sort of language telling insureds that when there is one purchaser of several State Farm policies, State Farm will allow the insured to select one policy for benefits, and then limit the rest," he says.

In the meantime, personal injury lawyer Richardson says State Farm policyholders who have been involved in serious injury accidents and who had multiple automobile policies in place at the time of the accident could have a rare opportunity to collect on additional settlements.

"There are millions and millions of dollars available to the people in the Valley that they are not even aware of," Richardson says.

Policyholders can go back at least six years in seeking additional claims, and, in some instances, for decades, according to Richardson.

Insurance industry leaders hope to avoid a feeding frenzy, cautioning consumers that the cost of reopening insurance settlements and seeking payments from multiple policies will only result in higher future costs.

"You and I pay that premium," says Chris Edmonson, president of Burns, Harrelson, Burns Insurance Agency Incorporated. "This isn't some assault on some giant devilish monster out there called the insurance company. This is an assault on your pocketbook.